Coastal Pipeline, Inc., anticipated cash flow from operating activities of $8 million in 2010. It will need to spend $1.5 million on capital investments in order to remain competitive within the industry. Common stock dividends are projected at $.6 million and preferred stock dividends at $.25 million.
a. What is the firm’s projected free cash flow for the year 2010?
b. What does the concept of free cash flow represent?